The Law Commission - Wellington Central

A class action is a court proceeding in which a group with similar interests collectively sues one or more defendants. The court proceeding is brought by a representative plaintiff on behalf of the class. We do not currently have class actions in Aotearoa New Zealand. Instead, claims that might be brought as class actions in other jurisdictions are brought as representative actions under High Court Rule 4.24. This rule allows a claim to be brought “on behalf of, or for the benefit of, all persons with the same interest in the subject matter of the proceeding.” Aotearoa New Zealand has seen an increasing number of representative actions, particularly since the arrival of litigation funding. However, our representative actions rule has changed little since the 19th century and it does not provide guidance on the many issues that arise in modern group litigation. Representative actions can be inefficient and expensive as the courts need to determine complex procedural issues without the benefit of a statutory framework.

Litigation funding involves a person who is not a party to and has no interest in the litigation agreeing to fund some or all of a plaintiff’s costs in exchange for a share of any sum recovered (the funder’s commission). In general, the funder will be paid nothing if the case is unsuccessful. If the case is successful, however, the funder will be reimbursed for the costs of the litigation and will be compensated for bearing the financial risk of the case through payment of the funder’s commission. Litigation funding is not limited to representative or class actions, but such actions are often unable to proceed without it.

Litigation funding is not specifically regulated in Aotearoa New Zealand. For centuries the common law has prohibited litigation funding, however the high costs of litigation may mean that litigation funding has an increasingly important role to play in facilitating access to justice.

The Commission is therefore conducting a review of the law relating to class actions and litigation funding in Aotearoa New Zealand. The scope of the Commission’s review is set out in the Terms of Reference below. In its final report the Commission will make recommendations as to what, if any, reform of the law is desirable.

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